Gulf Resources Announces the Receipt of Closing Notice of Bromine Factories #3, 4, and 11
September 26 2018 - 8:30AM
Gulf Resources, Inc. (NASDAQ:GURE) ("Gulf Resources" or the
"Company"), a leading manufacturer of bromine, crude salt,
specialty chemical products, and natural gas in China, today
announces it will have to close its three bromine factories (No. 3,
No. 4, and No. 11.) pursuant to a closing notice that the Company
received from the People's Government of Yangkou Town, Shouguang
City dated September 21, 2018. An unofficial full translation
of the closing notice is set forth below:
“According to the requirements imposed on Shandong bromine
production enterprises by the national environmental protection
inspection and the transformation and upgrading of the chemical
industry in 2017, all bromine production enterprises must meet the
goal of co-production of bromine and crude salt. After the bromine
is extracted, the brine water must be treated with sun-dried salt
and cannot be discharged directly. For bromine production
enterprises that fail to meet the requirements for co-production of
bromine and crude salt, they will be forced to close.
"Recently, the city formed a joint inspection team to conduct a
comprehensive on-site inspection of the city's bromine production
enterprises. Most of the crude salt fields surrounding your
company's Factory No.3, Factory No.4, and Factory No.11 have been
reclaimed as cultivated land or construction land. Under this
circumstance, your company's Factory No.3, Factory No.4, and
Factory No.11 cannot meet the requirements for bromine and crude
salt co-production. After research and consideration, it’s decided
to shut down your bromine Factory No.3, Factory No.4, and Factory
No.11. Your company should handle the production equipment and
facilities by itself. The land lease agreements signed by and among
the company and the local villages should be settled by
negotiation. For the remaining bromine factories with the area of
crude salt field that can be matched with bromine production of
those bromine factories, they can start production after the
completion of the project approval, planning approval, land use
rights approval and environmental protection assessment approval in
accordance with the “Notice on Accelerating the Special Renovation
of Violating Chemical Enterprises” (Lu Jing Xin Yuan [2018] No.
205). Production should be carried out in accordance with relevant
government regulations and bromine and crude salt co-production
requirements.”
As noted in recent press releases, the management of Gulf
Resources had expected that these three factories might be forced
to close if it could not find a solution to address. The
co-production of bromine and crude salt based upon the new
requirements that were implemented in 2017. As a result, the
company did not spend as much money on rectification for these
factories as it did on the others.
In closing these factories, the Company expects to take a
write-off; although the amount is difficult to be estimated at this
time. These factories have a net asset value of approximately $23.7
million (including approximately $382K spend on
rectification). Gulf Resources may have to bear the cost
approximately $200-300K of dismantling these factories. While much
of the equipment will be disposed of, some of the newer equipment
may be moved to the Company’s other factories. The Company will
also negotiate with the local villages over the land leases. The
Company expects to receive some land lease fees for return of the
land.
Mr. Liu Xiaobin, the CEO of Gulf Resources stated, “The
government is forcing the closure of many factories in Shandong
Province. While we would have preferred to retain all of our
factories, if we can maintain operations and production at 7 out of
our 10 factories, we believe we will be doing better than many of
our competitors. We also believe that with the closing of many
factories, pricing will remain high and that we can operate the
seven factories at higher levels of utilization, to partially
compensate for the closed factories.”
Gulf Resources believes the issues related to crude salt and
bromine at the remaining factories are almost resolved. While it
still needs approvals for project approval, planning approval, land
use rights approval and environmental protection assessment
approval, the local government is actively working with us. Six of
our factories previously passed inspections. The Company also
believes it has come up with a solution with a third party to build
an aqueduct for factory #10.
The final step in the process will be the repair of the
aqueducts, brine water reservoir, crude salt pans, wells, roads,
and factories from the damages caused by the recent floods.
Assuming these factories are all approved, the Company estimates
the costs of repairing and rebuilding due to the flood damages will
be $8-10 million.
As part of the flood repair process, Gulf Resources will first
focus on the aqueducts. Then it will repair the brine water
reservoir and crude salt pans, Next it will repair each of the
wells that have been covered with debris from the flood. It will
also have to repair some of the roads that lead to the factories.
The roads within the factories themselves did not sustain much
damage. Finally, it will repair the water damage to the factories
themselves.
“We have been through a long and difficult process,” Mr. Liu
stated, “but we believe we are now on a path to reopening seven of
our factories, hopefully by the beginning of next year.”
“Our new chemical factory had already received part of the
approvals, we are moving ahead on receiving the rest approvals for
it. The company is also doing testing at our natural gas well in
Sichuan, which may start trial production by fourth quarter of
2018.” Mr. Liu concluded. “We appreciate the support of our
long-term shareholders and want to assure you that we are working
diligently to restore our operations and return to
profitability.”
About Gulf Resources, Inc. Gulf Resources, Inc.
operates through threewholly-owned subsidiaries, Shouguang City
Haoyuan Chemical Company Limited ("SCHC"), Shouguang Yuxin Chemical
Industry Co., Limited ("SYCI"), and Daying County Haoyuan Chemical
Company Limited (“DCHC”). The company believes that it is one of
the largest producers of bromine in China. Elemental Bromine is
used to manufacture a wide variety of compounds utilized in
industry and agriculture. Through SYCI, the company
manufactures chemical products utilized in a variety of
applications, including oil and gas field explorations and
papermaking chemical agents, and materials for human and animal
antibiotics. DCHC was established to further explore and develop
natural gas and brine resources (including bromine and crude salt)
in China. For more information,
visit www.gulfresourcesinc.com.
Forward-Looking Statements
Certain statements in this news release contain forward-looking
information about Gulf Resources and its subsidiaries' business and
products within the meaning of Rule 175 under the Securities Act of
1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and
are subject to the safe harbor created by those rules. The actual
results may differ materially depending on a number of risk factors
including, but not limited to, the general economic and business
conditions in the PRC, future product development and production
capabilities, shipments to end customers, market acceptance of new
and existing products, additional competition from existing and new
competitors for bromine and other oilfield and power production
chemicals, changes in technology, the ability to make future
bromine asset purchases, and various other factors beyond its
control. All forward-looking statements are expressly qualified in
their entirety by this Cautionary Statement and the risk factors
detailed in the company's reports filed with the Securities and
Exchange Commission. Gulf Resources undertakes no duty to revise or
update any forward-looking statements to reflect events or
circumstances after the date of this release.
CONTACT: Gulf Resources, Inc.
Web: http://www.gulfresourcesinc.com
Director of Investor Relations
Helen Xu (Haiyan Xu) beishengrong@vip.163.com
Gulf Resources (NASDAQ:GURE)
Historical Stock Chart
From Aug 2024 to Sep 2024
Gulf Resources (NASDAQ:GURE)
Historical Stock Chart
From Sep 2023 to Sep 2024